Outsourcing vs. Outstaffing: two Models for the Externalisation of IT Development
The software industry is growing. While the industry’s turnover in Germany in 2010 was 15.6 billion euros, it is expected to almost have doubled to 27.6 billion euros by the end of 20201. The IT market is looking for skilled experts. The search for employees for the IT department who are well trained and at the same time affordable and fit in with the company is causing increasing headaches for HR staff. A rising number of companies of all sizes are outsourcing the development of the solutions they need. Different business models deal with delegating the development of software solutions from one company to another. Outsourcing and outstaffing are two different concepts to consider when deciding to outsource IT development.
by Feras Tanan
When outsourcing software development, a company hires another company to carry out a project from A to Z. The client is not involved in the development process. He neither leads the development team nor does he supervise the development process or solve technical difficulties if they occur. This approach is best suited to non-technical companies without in-house know-how. The finished solution is purchased.
If required, the company can set up an operational interface to the outsourcing provider with an IT project manager and receive regular updates.
Lionel Born, Founder and CEO of L-One Systems
»The entire management of hiring, leading and training the remote development team is the responsibility of the the service provider for outsourcing as well as outstaffing.«
Before starting an IT project, the arguments for or against outsourcing and outstaffing should be considered. This consideration can make a decisive contribution to the success of the project.
- no management efforts for recruitment, administration, training, or further HR activities are required by the client
- no technical supervision by the contractor required
- use of the latest technology during development is guaranteed, as the outsourcing provider is a specialized IT company
- no direct control over the development team and development process
- no development of in-house know-how for software solutions
- higher costs for the client are incurred for outsourcing in comparison to outstaffing
In outstaffing, a company expands its internal development team with the development services of an outstaffing provider. The client concludes a contract with the outstaffing service provider for the provision of remote developers. As with outsourcing, with outstaffing, the client does not have to employ its own staff. The outstaffing service provider takes over the human resource management. The selection and management of the remote developers and the time frame, on the other hand, are technically managed by the client and the remote team is available to him within the agreed time frame. The client is responsible for structuring the development process and distributing tasks to the remote developers.
Companies are increasingly working with outstaffing teams instead of hiring their own developers. On the one hand, outsourcing the time-consuming organizational management for the additional developers relieves the company’s own HR management. This eliminates hiring procedures, induction, training, payroll, accounting, ensuring employee satisfaction – and last but not least, fixed costs.
On the other hand, the outstaffing process means that highly qualified, yet affordable developers are available very quickly.
Advantages and Disadvantages of Outstaffing
Serious outstaffing service providers offer access to a large pool of certified developers with a wide range of specialist areas (IT stacks).
- no management efforts for recruitment, administration, training, or other HR activities are required by the client
- no technical supervision by the contractor required
- Use of the latest technology during development is guaranteed since the outsourcing provider is a specialized IT company
- Additional effort for setting up a development process followed by both the internal and the external development team and interlinking both in a productive way.
Outsourcing und Outstaffing at L-One
For our customers, we want to align the outstaffing experience with the processes of their internal developers. We use the same set of tools for communication between our clients and their internal developers, including Slack, Microsoft Teams (including the various Microsoft 365 applications), Trello, JIRA, Bitbucket, as well as a wide range of collaboration software that facilitates collaboration between different sites.
Some of our customers refer to the L-One Outstaffing team as our “employees”. We are happy about that. That is our goal.Valerie Dietsche, Customer Relationship Manager at L-One Systems, Darmstadt
Outsourcing and outstaffing projects usually involve the employment of teams working remotely. The outstaffing provider must secure the quality of the service delivered, always ensuring maximal productivity. We at L-One System are aware of this and therefore call our outsourcing/outstaffing services “made in Germany”. For this reason, data protection, reliability, availability, and communication skills are key concepts, that our dedicated offshore team always implement. Our guideline and protocol structure assures the implementation of these concepts.
To find out which of the two options, outsourcing, outstaffing, or a mixture of the two is right for you, we recommend that you arrange a meeting with one of our experts to find out what is best for you. Find out more about our services here.
Sources & Links
1= Software Sales in Germany 2007 to 2020:
Statista (in GER)
Contact us: Are you planning an IT project and you are looking for reinforcement?
How we work: Take a look at our case studies …